Suppose Expected Inflation and Actual Inflation Are Both Relatively High,and

question 75

Multiple Choice

Suppose expected inflation and actual inflation are both relatively high,and unemployment is at its natural rate.If the Fed then pursues a contractionary monetary policy,which of the following results would be expected in the short run?

• A)Expected inflation would exceed actual inflation,and unemployment would exceed its natural rate.
• B)Expected inflation would exceed actual inflation,and unemployment would be below its natural rate.
• C)Actual inflation would exceed expected inflation,and unemployment would exceed its natural rate.
• D)Actual inflation would exceed expected inflation,and unemployment would be below its natural rate.

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Definitions:

Sum of Its Parts

A principle indicating that the whole entity or system's value or functionality is equal to the combination of its individual components or elements.

Teamwork

The collaborative effort of a group to achieve a common goal or complete a task in the most effective and efficient way.

Short-Run Equilibrium

A state where supply and demand are balanced at a particular price level within a short time frame, especially in markets or within firms.

Long-Run Equilibrium

A state where there is no tendency for economic variables, such as prices, outputs, or employment, to change, because all agents in the economy have fully adjusted to any changes.